Citibank Wealth Management Weekly Investment … Investment Insight Citibank Wealth Management Weekly Market Review Equity Chart 2: Equity Market Performance • U.S. stocks: The S&P

Weekly Investment Insight Citibank Wealth Management

March 31, 2014 with data as of March 28

Weekly Market Review • Market Overview 02 • Equity 03 • Bond & Commodities 04

Market Insight • Weekly Commentary • Hong Kong Stocks Update & Sector Outlook

Citi analysts’ forecasts • Equity Index 07 • Commodities 08 • Foreign Exchange 09

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Weekly Market Review Market Overview Chart 1: Weekly Market Performance

Source: Bloomberg L.P., as of March 28, 2014 ^Reference Indices: Citigroup Bond Indices Series

Key Economic Releases over the Week • China manufacturing weakens: The preliminary reading

of HSBC/Markit’s Purchasing Managers’ Index dropped to an eight-month low of 48.1 in Mar., from a final reading of 48.5 in Feb., and has been contracting for a third month.

• US consumer spending picks up: Household purchases rose 0.3% in Feb., the biggest gain in three months, matching market estimate, after a 0.2% gain in Jan.

Key Market Events / Policies over the Week • Ukraine Crisis: U.S. President Barack Obama called for

Russia to de-escalate the situation in Ukraine and warned of further isolation and "costs" if Russia doesn't respond.

• China Money Rate falls: The 7-day repo rate snapped a 11-day gain, fell 65 basis points to 4.18% last Friday, as Chinese Premier Li Keqiang said the country has policies in reserve to deal with any economic volatility this year, fueled speculation that the government may ease policy.

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Citi analysts’ view: Chinese economy • The Mar. official manufacturing PMI may be unchanged at

50.2. GDP growth in 1Q may decelerate to about 7.3% year-on-year, from 7.7% in 4Q 2013.

• The government may introduce policy easing in 2Q to sustain growth at above 7% this year, including utilizing the fiscal automatic stabilizer, providing adequate liquidity to drive down financing costs, advancing investment projects, and adopting a differentiated property policy.

Market Overview • Global equities gained last week, led by European

stocks, as a gauge of economic confidence in the euro area rose for an 11th straight month in March to its highest level since July 2011. (Please turn to page 5 for more analysis).

• In the U.S., biotechnology and internet stocks slumped as money rotated out from winners in the past year.

-0.5%

1.8%

3.3%

2.9%

6.1%

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0.2%

0.4%

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S&P 500 Index

STOXX Europe 600

Nikkei 225

Hang Seng Index

HSCEI

Shanghai Comp.

US Gov't Bond Index ^

World IG Corp Bond Index ^

US HY Bond Index ^

US Dollar Index

COMEX Gold Futures

WTI Crude Oil Futures


Weekly Market Review Equity

Chart 2: Equity Market Performance

• U.S. stocks: The S&P 500 Index fell 0.5% to 1,857. The Nasdaq Biotech Index (NBI) slumped 7% while the Nasdaq Internet Index (QNET) fell 6%, as money rotated out from winners in the past year. The NBI and QNET rallied 79% and 64% respectively in the 12 months through February.

• China stocks: The Hang Seng China Enterprises Index, rallied 6.1% as earnings beat estimates and on speculation the government is loosening policy.

• Japan stocks: The Nikkei 225 rebounded 3.3%. Year-to-date, the index is still down 9.8% as the yen appreciates as political tension in Ukraine escalates.

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Source: Bloomberg L.P., as of March 28, 2014

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Citi analysts’ view: Japan equities • Citi analysts lowered the end-2014 TOPIX forecast

to 1,400 from 1,520, while Nikkei 225 forecast was cut to 17,100 from 18,400.

• However, Citi analysts are positive on Japanese equities because of 1) earnings per share is likely to set an all-time record; 2) there is lots of room for valuations to rise, and 3) in 2014, major policy initiatives will be decided or implemented, including a corporate tax rate cut and additional monetary easing by the Bank of Japan.

Market WeeklyClose Change 1-Week 3-Month YTD

Global / USMSCI AC World Index 408.0 +3.6 0.9% 0.3% -0.1%S&P 500 Index 1,857.6 -8.9 -0.5% 0.9% 0.5%Dow Jones Industrial Average 16,323.1 +20.3 0.1% -0.9% -1.5%Russell 2000 Index 1,151.8 -41.9 -3.5% -0.8% -1.0%EuropeSTOXX 600 333.8 +5.8 1.8% 1.9% 1.7%FTSE 100 Index 6,615.6 +58.4 0.9% -2.0% -2.0%DAX Index 9,587.2 +244.3 2.6% 0.0% 0.4%CAC 40 Index 4,411.3 +76.0 1.8% 3.1% 2.7%JapanNikkei 225 14,696.0 +471.8 3.3% -9.2% -9.8%AsiaMSCI Asia ex Japan 541.8 +17.3 3.3% -1.2% -1.8%Shanghai Composite 2,041.7 -5.9 -0.3% -2.8% -3.5%Hang Seng Index 22,065.5 +628.8 2.9% -5.1% -5.3%Hang Seng China Enterprise Index 10,001.8 +574.5 6.1% -7.6% -7.5%Taiwan TAIEX Index 8,774.6 +197.5 2.3% 2.8% 1.9%Kospi Index 1,981.0 +46.1 2.4% -1.1% -1.5%BSE Sensex 30 Index 22,340.0 +586.2 2.7% 5.4% 5.5%Jakarta Composite Index 4,768.3 +68.1 1.4% 13.2% 11.6%Straits Times Index 3,172.2 +98.8 3.2% 0.7% 0.1%FTSE Bursa Malaysia KLCI 1,850.7 +30.3 1.7% -0.6% -0.9%SET Index 1,368.9 +8.4 0.6% 5.4% 5.4%Latin AmericaBrazil Bovespa Index 49,768.1 +2387.1 5.0% -2.9% -3.4%Mexico IPC Index 40,048.2 +26.5 0.1% -6.3% -6.3%Emerging EuropeRussia RTS Index $ 1,186.3 +50.1 4.4% -17.9% -17.8%

Change (%)Equity


Weekly Market Review Bond & Commodities • 10-year Treasury yield fell 2 basis points (bps) to

2.72% last week, as U.S. President Barack Obama said Russia “miscalculated” and that sanctions could escalate.

• U.S. high yield bond returned 0.2% last week, with the avg. credit spread tightened 5 bps to 395 bps, while the avg. bid yield fell 2 bps to 6.24%, according to Citi high yield market Index.

• WTI crude oil futures rose 2.2% to $101.67 a barrel, a three-week high, as supplies at Cushing, Oklahoma, the delivery point for the contract, reached a two-year low.

• Comex gold futures tumbled 3.2% to $1,293.8 an ounce, a six-week low, as signs of a U.S. economic recovery bolster the case for continued tapering of monthly bond purchases by the Federal Reserve.

Chart 3: Bond and Commodities Performance

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Bond IndicesCitigroup US Gov't Bond Index 759.3 +1.3 0.2% 1.3% 1.3%Citigroup WBIG - Corporate Index 235.4 +0.9 0.4% 2.8% 2.6%Citigroup Global EM Sovereign USD 661.2 +9.5 1.5% 3.5% 3.4%Citigroup High Yield Market Index 842.4 +1.9 0.2% 3.0% 2.9%JACI Non-Investmenty Grade Corp. 205.8 +2.2 1.1% 1.3% 1.3%

US Treasury Yields3-Month - Yield (%) 0.04 -1 -3 -32-Year - Yield (%) 0.45 +3 +6 +75-Year - Yield (%) 1.75 +4 +1 +110-Year - Yield (%) 2.72 -2 -28 -3130-Year - Yield (%) 3.55 -6 -39 -42


EnergyWTI Crude Futures ($/barrel) 101.7 +2.2 2.2% 1.3% 3.3%Brent Crude Futures ($/barrel) 108.1 +1.1 1.1% -3.7% -2.5%Natural Gas Futures (MMBtu) 4.5 +0.2 4.0% 1.8% 6.0%Base MetalsLME Aluminum Futures ($/MT) 1,758.0 +35.0 2.0% -2.9% -2.3%LME Copper Futures ($/MT) 6,670.0 +190.0 2.9% -9.6% -9.4%Precious MetalsComex Gold Futures ($/oz.) 1,293.8 -42.2 -3.2% 6.6% 7.6%Comex Silver Futures ($/oz.) 19.8 -0.5 -2.6% -1.1% 2.3%

Commodity Price Change (%)

Fixed income Change (%)

Change in Yield (in bps)


European equities lag behind its U.S. and global peers in March on concerns over political tensions and sanctions between Russia and the West. The Stoxx 600 Index fell 1.3% since March 1, while the S&P 500 Index dropped 0.1% over the same period.

• Citi analysts recently revised up 2014 and 2015 euro area GDP growth forecasts to 1.3% and 1.6% respectively, from 1.1% and 1.3%, reflecting Citi analysts’ more constructive view on Germany, Italy and Spain in 2014-15.

• The European Central Bank may cut benchmark interest rate from 0.25% to 0.1% in 2Q 2014 when projections confirm that the medium-term price inflation target is unlikely to be met.

Citi analysts’ views: European equities • According to data from EPFR Global, European stocks

have attracted nearly $40 billion so far in 2014, a record start to the year. This year’s inflow is considered impressive as inflows in 2013 totaled US$53 billion.

• There are signs of companies working on to boost earnings. The European mining sector is leading the way. Mining companies have delivered better than expected cost performance. Additionally, mining corporations have also started to cut capex. This should result in higher free cash flow which could be distributed via share buybacks, which in turn would boost earnings per share (EPS).

• EPS is expected to growth 10% in 2014. On the other hand, The estimated price-to-earning (P/E) ratio of the Stoxx 600 Index is 14.4x, while the P/E ratio of the S&P 500 is 15.9x.

• Citi analysts anticipate the Stoxx 600 Index to reach 370 by end-2014, representing potential upside of 11% compared with 333.76, the market close on Mar 28. .

Key Points • According to data from EPFR Global, European

stock funds have attracted nearly US$40 billion so far in 2014, a record start to the year.

• The Stoxx 600 Index may reach 370 by end-2014, representing potential upside of 11%.

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Market Insight European equities to benefit from accelerating economic growth and fund flows

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Citi analysts’ views: The European economy • A composite purchasing managers index (PMI) of

manufacturing and services activity in the euro area was at 53.2 in March, stayed close to a three-year high, as manufacturing in France returned to growth for the first time in two years.

• The composite euro area PMI has been above 50, indicating expansion, since July 2013.


Last week, shares in Chinese banks surged after China Securities Regulatory Commission (CSRC) announced to issue the official preferred shares management rule. The guideline specified the qualified preferred shares issuers would include the listing companies in SSE 50 Index, i.e., mostly the large-cap liquid names in the Shanghai stock market.

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• The Hang Seng Index rose 2.9% during the week to 22,065, while the Hang Seng China Enterprises Index rallied 6.1% to 10,001.

• Tencent (700) slumped 6.6% to $535 amid concern valuations for Internet stocks are too high. The stock dropped 16% since March 6 after its price-to-earnings ratio reached the highest in almost six years.

• CITIC Pacific (267) soared 12.7% on a plan to buy its parent’s assets. Citic Pacific signed a framework agreement to acquire its parent’s main operating unit, Citic Ltd. Citic Pacific will pay for the purchase in cash and new shares, with the terms still being negotiated.

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Market Insight Hong Kong Stocks Update Chart 5: Weekly Top 10 Turnover HSI constituents

Sector Update: Chinese Banks

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Citi analysts’ views: Preferred shares • Preferred shares will be considered as Additional Tier 1

capital , up to 1% point of the Tier 1 ratio according to the China Banking Regulatory Commission (CBRC).

• This will help banks to recapitalize without issuing common equity and would be positive for banks that have relatively lower Tier 1 ratios.

• Citi analysts expect most of the major banks to be interested in issuing preferred shares, even including relatively well capitalized banks.

• Citi analysts would not be surprised if banks begin to seek shareholder approval for preferred share issuance in the upcoming Annual General Meetings.

• Citi analysts have been of the view that equity raising is unlikely for the H-share banks in the near term because of preferred share issuance and all the banks are still well above the CBRC's official minimum capital requirements.


Close Weekly 52-Week 52-WeekName Ticker 3/28/2014 Return High LowHANG SENG INDEX 22,065.53 2.9% 24,111.55 19,426.36TENCENT HOLDINGS LTD 700 535.00 -6.6% 646.00 237.00IND & COMM BK OF CHINA-H 1398 4.72 6.5% 5.70 4.33CHINA CONSTRUCTION BANK-H 939 5.36 7.2% 6.65 4.89CHINA MOBILE LTD 941 69.90 8.4% 89.20 63.65GALAXY ENTERTAINMENT GROUP 27 65.95 -6.1% 84.50 30.30HUTCHISON WHAMPOA LTD 13 103.20 -3.6% 113.50 76.60BANK OF CHINA LTD-H 3988 3.40 9.3% 3.84 2.96PETROCHINA CO LTD-H 857 8.49 8.0% 10.46 7.31AIA GROUP LTD 1299 36.95 5.3% 40.45 31.00PING AN INSURANCE GROUP CO-H 2318 64.25 6.4% 76.50 47.85


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Citi analysts’ Forecasts: Global Equity Index Forecasts (Remarks: Forecasts as of March 27, 2014)

7 Source: Bloomberg L.P. and Citi Forecasts, performance and market data as of March 28, 2014

2014-03-31

Market End ExpectedRegion / Index 1-Week 3-Month YTD Close 2014 Change 2014 2015 2014 2015GlobalGlobal MSCI AC World Index 0.9% 0.3% -0.1% 408.0 450 10.3% 14.6 13.1 1.9 1.8EM MSCI EM 4.2% -1.3% -1.8% 984.9 1,075 9.1% 10.5 9.5 1.3 1.2

Developed CountriesU.S. S&P 500 Index -0.5% 0.9% 0.5% 1,857.6 1,975 6.3% 15.9 14.2 2.4 2.2

Dow Jones Ind. Avg. 0.1% -0.9% -1.5% 16,323.1 17,800 9.0% 14.7 13.5 2.7 2.5Europe Stoxx Europe 600 1.8% 1.9% 1.7% 333.8 370 10.9% 14.4 12.7 1.7 1.6

FTSE 100 0.9% -2.0% -2.0% 6,615.6 8,000 20.9% 13.6 12.5 1.9 1.8Japan TOPIX Index 3.5% -8.0% -8.9% 1,186.5 1,400 18.0% 14.2 13.0 1.2 1.1Australia S&P / ASX 200 0.5% 0.8% 0.3% 5,366.9 5,850 9.0% 15.1 14.0 1.9 1.9

AsiaAsia ex Japan MSCI Asia ex Japan 3.3% -1.2% -1.8% 541.8 660 21.8% 11.1 10.0 1.3 1.2China Shanghai Composite -0.3% -2.8% -3.5% 2,041.7 2,805 37.4% 7.9 6.9 1.1 1.0Hong Kong Hang Seng Index 2.9% -5.1% -5.3% 22,065.5 25,000 13.3% 10.1 9.3 1.2 1.1

Hang Seng China Ent Index 6.1% -7.6% -7.5% 10,001.8 14,335 43.3% 6.9 6.3 1.0 0.9Taiwan Taiwan TWSE Index 2.3% 2.8% 1.9% 8,774.6 8,700 -0.9% 11.9 11.0 1.2South Korea KOSPI Index 2.4% -1.1% -1.5% 1,981.0 2,400 21.2%India SENSEX 30 Index 2.7% 5.4% 5.5% 22,340.0 21,800 -2.4% 16.6 14.1 2.7 2.3Indonesia Jakarta Composite Index 1.4% 13.2% 11.6% 4,768.3 5,300 11.2% 14.9 12.7 2.7 2.4Singapore Straits Times Index 3.2% 0.7% 0.1% 3,172.2 3,278 3.3% 14.2 12.8 1.3 1.2Malaysia FTSE Bursa Malaysia KLCI 1.7% -0.6% -0.9% 1,850.7 1,880 1.6% 16.4 15.0 2.2 2.0Thailand SET Index 0.6% 5.4% 5.4% 1,368.9 1,440 5.2% 13.0 11.5 1.9 1.8

Latin AmericaBrazil Bovespa Index 5.0% -2.9% -3.4% 49,768.1 55,000 10.5% 10.0 8.9 1.1 1.0Mexico BOLSA IPC Index 0.1% -6.3% -6.3% 40,048.2 47,600 18.9% 16.9 15.7 2.4 2.2

Eastern EuropeRussia RTS Index $ 4.4% -17.9% -17.8% 1,186.3 1,640 38.2% 2.9 2.6 0.4 0.4

Forecast P/E ratio Forecast P/B ratioCiti analysts' forecasts Valuation

Past Performance


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Citi analysts’ Forecasts: Commodity Future Price Forecasts (Remarks: Forecasts as of March 25, 2014)


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Market Expected Change1-Week 3-Month YTD Close 0-3 Months 6-12 Months (6-12 Months)

EnergyNYMEX WTI Crude USD/bbl 2.2% 1.3% 3.3% 101.67 88.0 96.0 -5.6%ICE Brent Crude USD/bbl 1.1% -3.7% -2.5% 108.07 100.0 102.5 -5.2%NYMEX Natural Gas USD/MMBtu 4.0% 1.8% 6.0% 4.49 5.00 4.90 9.3%Base MetalsAluminum (LME) USD/MT 2.0% -2.9% -2.3% 1,758.0 1,730 1,820 3.5%Copper (LME) USD/MT 2.9% -9.6% -9.4% 6,670.0 6,300 6,850 2.7%Lead (LME) USD/MT -0.5% -9.6% -6.8% 2,067.0 2,030 2,300 11.3%Nickel (LME) USD/MT -2.4% 10.6% 13.0% 15,710.0 17,000 20,000 27.3%Tin (LME) USD/MT 0.2% 0.1% 2.3% 22,875.0 22,500 24,500 7.1%Zinc (LME) USD/MT 1.3% -5.4% -3.8% 1,976.5 1,970 2,130 7.8%Precious MetalsGold (Comex) USD/oz -3.2% 6.6% 7.6% 1,293.8 1,310 1,360 5.1%Silver (Comex) USD/oz -2.6% -1.1% 2.3% 19.8 20.2 21.5 8.6%Platinum (NYMEX) USD/oz -2.2% 2.1% 2.5% 1,404.7 1,480 1,525 8.6%Palladium (NYMEX) USD/oz -2.0% 8.7% 7.7% 773.7 800 860 11.2%AgricultureCorn (CBT) USd/bu 2.7% 15.1% 16.6% 492.0 450 390 -20.7%Wheat (CBT) USd/bu 0.3% 14.2% 14.9% 695.5 635 655 -5.8%Soybean (CBT) USd/bu 2.0% 7.9% 9.4% 1,436.5 1,315 1,000 -30.4%Rice (CBT) USD/cwt 0.6% 0.4% 0.0% 15.51 15.3 15.3 -1.4%Cotton (NYB-ICE) USd/lb 0.5% 11.4% 10.8% 93.7 84.0 78.0 -16.8%Sugar (NYB-ICE) USd/lb 6.8% 9.4% 9.6% 18.0 18.0 18.0 0.1%Coffee (NYB-ICE) USd/lb 5.5% 55.2% 63.1% 180.6 175 200 10.7%Cocoa (NYB-ICE) USD/MT 0.9% 7.1% 10.1% 2,983.0 3,100 3,300 10.6%

Past Performance Citi analysts' forecasts


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Citi analysts’ Forecasts: Foreign Exchange Forecasts (Remarks: Forecasts as of March 21, 2014)


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Market Expected Change1-Week 3-Month YTD Close 0-3 Months 6-12 Months (6-12 Months)

Major PairsEuro -0.3% 0.0% 0.1% 1.3752 1.38 1.40 1.8%Japanese Yen -0.6% 2.3% 2.4% 102.83 105 107 -3.9%British Pound 0.9% 0.9% 0.5% 1.6638 1.66 1.73 4.0%Swiss Franc -0.4% 0.5% 0.7% 0.8868 0.89 0.89 -0.4%Australian Dollar 1.8% 4.3% 3.7% 0.9247 0.91 0.92 -0.5%New Zealand Dollar 1.5% 6.3% 5.4% 0.8661 0.86 0.87 0.5%Canadian Dollar 1.4% -3.2% -4.0% 1.1061 1.13 1.15 -3.8%Dollar Index 0.1% -0.3% 0.2% 80.18 80.40 79.62 -0.7%AsiaChinese Renminbi 0.2% -2.3% -2.5% 6.2125 6.30 6.08 2.2%Indonesian Rupiah 0.6% 7.9% 7.1% 11361 11440 12200 -6.9%Indian Rupee 1.7% 3.3% 3.2% 59.89 61.0 64.3 -6.9%Korean Won 1.1% -1.4% -1.8% 1069 1060 1080 -1.0%Malaysian Ringgit 1.1% 0.5% 0.1% 3.27 3.33 3.40 -3.7%Philippine Peso 0.9% -1.1% -1.1% 44.89 45.0 45.7 -1.8%Singapore Dollar 1.2% 0.8% 0.4% 1.26 1.27 1.30 -3.2%Thai Baht -0.3% 1.0% 0.6% 32.50 33.0 34.5 -5.8%Taiwan Dollar 0.3% -1.8% -2.3% 30.52 30.5 30.2 1.1%EMEACzech Koruna -0.3% 0.0% -0.3% 19.95 - - -Hungarian Forint 1.2% -4.0% -3.6% 224.41 - - -Polish Zloty 0.3% -0.5% -0.3% 3.03 - - -Israeli Shekel -0.4% -0.3% -0.7% 3.50 3.40 3.60 -2.8%Russian Ruble 1.3% -8.9% -8.1% 35.76 37.6 39.4 -9.2%Turkish Lira 1.9% -1.7% -2.0% 2.19 2.30 2.40 -8.7%South African Rand 3.0% -0.4% -0.8% 10.58 11.20 11.70 -9.6%Latin AmericaBrazilian Real 2.8% 3.4% 4.5% 2.26 2.45 2.65 -14.7%Chilean Peso 2.2% -4.7% -4.5% 550.16 575 590 -6.8%Mexico Peso 1.2% -0.1% -0.3% 13.07 13.4 13.1 -0.2%Colombian Peso 1.5% -1.8% -1.8% 1,964.85 2060 2150 -8.6%

Past Performance (vs. USD) Citi analysts' forecasts

Documents

Citibank Wealth Management Weekly Investment … Investment Insight Citibank Wealth Management Weekly Market Review Equity Chart 2: Equity Market Performance • U.S. stocks: The S&P